Did you know that you can use your IRA to invest in Real Estate? Your Financial Advisor does and he (or she) is very mad at me right now for bringing this up. In 1975 Congress passed the Employee Retirement Income Security Act (ERISA) which is the law that created the Individual Retirement Account (IRA). My favorite part of this law is that congress only specified what it could not invest in: Life Insurance Contracts & Collectibles such as Art.

Notice something missing from that list? If you said real estate you would be correct! Wondering why you haven’t heard about this? Here is what IRA123.com had to say:

Once ERISA was passed, the securities markets were responsible for bringing the IRA and 401(k) to the mass market. The banks and brokerage houses created a misconception that buying stocks, bonds and mutual funds was all that was allowed through retirement products such as an IRA. This is 100% false! Banks and brokerage houses have a vested interest in having you invest in stocks, bonds and mutual funds - not real estate, businesses and other non-traditional investments. Do not let their interests, or the lack of knowledge on the part of your financial advisor limit your ability to maximize the investment potential of your retirement accounts.

I, myself, only became aware of this information in the last couple of days due to one of my more financially astute clients and felt that this information should be passed on. In the name of diversification shouldn’t your portfolio include real estate as well as stocks and bonds? Whether its a multi-family producing rental income or a TIC (tenant in common) there are plenty of ways to preserve and grow the capital in your retirement accounts while sheltering you from the current bear market the financial markets are experiencing.

I’m going to setup an Self Directed IRA folder in the categories on the left hand side of the website. I will go more in depth about this topic and break down examples to help you understand this subject more confidently over the next couple of weeks.

A couple of my large clients are transitioning capital away from hedge funds and private equity groups to invest in large income properties. Why shouldn’t the average investor be able to do the same – and tax free!

Filed under: Self-Directed IRA